ITC Spotlight ‑ June 2023 Edition

In April, the Washington Examiner published an op-ed by W. Bruce DelValle titled, "The International Trade Commission Is the Silent Assassin of American Progress."¹ The opinion piece essentially argues that the ITC is a rogue government agency that harms innovation in the United States, rather than protecting it. With all due respect to Mr. DelValle, I believe the opposite is true.

The ITC Has Stayed Faithful to its Lawful Purpose

My friend, Michael Rosen of the American Enterprise Institute, is quoted in the article saying the ITC is "a quasi-judicial, independent federal agency that was created to encourage and guard American manufacturing and intellectual property." That is true. It has the power to bar products from being imported into the United States that are manufactured abroad using unfair methods of competition, such as patent or trademark infringement, trade secret misappropriation, or false advertising. But the article goes further, arguing the ITC has "unfettered and unguided power" that has allowed it to punish American companies "unchecked."

In reality, there are numerous protections and levels of review for parties involved in ITC investigations. Investigations are litigated under rules very similar to those employed in federal district courts. They are overseen by experienced Administrative Law Judges ("ALJs"), akin to district court judges, who are constrained by many years of federal and ITC precedent. In most investigations, an independent attorney from the ITC's Office of Unfair Import Investigations ("OUII") participates in the investigation as a third party making sure the public interest is represented-something not offered in any district court proceeding. ALJs issue their opinions and findings of fact in detailed opinions, typically well over a hundred pages in length. Then, those opinions are reviewed, and if necessary modified, by a panel of six Commissioners (who are split equally between Republican and Democrat appointees) and a General Counsel's office staffed with highly-experienced attorneys. Finally, all final determinations from the ITC can be appealed to the Court of Appeals for the Federal Circuit for an additional level of review.

The article further contends that the ITC is "neither competent nor empowered to determine" the matters before it. As a creature of statute, the ITC is empowered by and operates within the confines of 19 U.S.C. § 1337. There have been challenges to its authority, and they were unsuccessful.² Moreover, the ALJs who receive evidence and decide cases there in the first instance are among the most knowledgeable and experienced in the relevant law of any judges, federal or administrative. Aside from being specialists in "Section 337" law, the current ALJs bring a wealth of relevant experience to the bench. Among them are a former attorney from the ITC General Counsel's Office, a former Administrative Patent Judge from the U.S. Patent & Trademark Office, law clerks to district court and Federal Circuit judges, and attorneys who formerly practiced in the OUII and private practice before the ITC. In addition, almost all have technical degrees in addition to their law degrees, which is especially beneficial in a court that deals with so many patent cases.

The ITC Protects U.S. Industries

The article argues that U.S. companies "operate in fear" while foreign companies "have free rein to make complaints to the ITC" and "steal IP" from American companies, but these statements are hyperbolic and incorrect. It is important to appreciate that the ITC protects industries in the United States, not companies. The "domestic industry" requirement, which is a jurisdictional requirement all complainants must satisfy in order to obtain relief, ensures that the complainant has made significant domestic investments in plants, equipment, labor, or capital related to articles protected by the intellectual property at issue.³ Alternatively, a complainant that does not manufacture articles may satisfy the domestic industry requirement by showing substantial investment in the exploitation of the technology at issue, such as in engineering, research and development, or licensing.⁴ Thus, any company that has made significant investments in developing an industry in the United States-whether that company is headquartered in the U.S. or abroad-can bring a complaint in the ITC to protect its U.S. investment. Conversely, any company-regardless of where it is headquartered-that elects to manufacture its products outside the U.S. and import them into the U.S. may be subject to an ITC investigation if those products infringe the intellectual property of a company that has significantly invested in the U.S. market. Companies that opt to manufacture products in the United States are immune, as importation is a jurisdictional requirement the complainant must prove.

Finally, the article cites "non-practicing entities" ("NPEs") as an example of companies who file "frivolous complaints" in the ITC that stifle innovation by American companies. NPEs are companies that own the rights to a technology (typically, in the form of patents) but do not manufacture any products. The term NPE is most commonly understood to refer to opaquely-formed limited liability companies that purchase patents for the purpose of suing "deep pocket" companies for money. However, NPEs also include universities legitimately engaged in research, small entity inventors that do not have the capital to bring their product to market, and companies whose business model is to develop technology then license it to manufacturers.

It is true that NPEs spawn much patent litigation in the United States. This is an unfortunate phenomenon that the ITC has not been immune from. However, the problem is far less prevalent in the ITC than in federal district courts. Over the past five years, there have been 256 ITC investigations, 25 (less than 10%) of which were brought by NPEs whose business model primarily focuses on purchasing and asserting patents.⁵ In contrast, Unified Patents calculates that nearly 60% of all patent litigation brought in district courts in 2022 was brought by such NPEs, and that number was on-par with its 7-year average.⁶ The disparity in favor of the ITC is largely due to the domestic industry requirement (which is not present in district court litigation), and the fact that ITC complaints are much more substantive and time-consuming to prepare than district complaints.

Conclusion
Like any institution, the ITC is not perfect. In fact, nearly every year it seems there is a bill proposed in Congress to tweak some aspect of it. But the fact that Congress has not seen the need to tinker with how the ITC does its business shows that there is no great concern in Congress or industry that the ITC is stifling American innovation. As someone who has practiced extensively in that court for over 20 years, I can attest to how seriously the ITC takes its statutory mandate.